RJM Enterprises is a manufacturer of consumer electronics products. The industry is very competitive and RJM has seen its profits fall in recent years, including an operating loss of $18,585 last year. RJM was able to turn that around this year by aggressively cutting costs. The summarized financial results for RJM are shown below.

_____________________Current Year______Prior Year

Gross sales:......................$934,920...........$1,273,545

Less variable costs

Materials..........................$550,368...........$ 746,200

Labor...............................329,280.............511,875

Total contribution margin.......$ 55,272............$ 15,470

Fixed costs...........................33,509..............34,055

Operating income.................$ 21,763.........$ (18,585)

Jim Green, the management accountant at RJM, is analyzing the company's performance for this year, in order explain to management the specific aspects that drove the company to success. Some of the information Jim obtained is:

_________________________Current Year_________Prior Year

Sales units............................39,200.........................45,500

Price...................................$23.85.........................$27.99

Materials cost per unit of material..$7.80...........................$8.20

Materials required/unit.................1.80............................2.00

Labor required/unit.....................0.60............................0.75

Wage rate ($/hour)..................$14.00.........................$15.00

Assume that RJM, for efficiency and to reduce cost, maintains little or no materials or work-in process inventory.

Required

1. Determine the selling price variance for the current year based on sales dollars. Determine the volume variance based on contribution margin.

2. Determine the variable cost variances:

a. The usage and price variances for materials.

b. The usage and rate variances for labor.

3. Interpret your findings in requirements 1 and 2 above.